If you’re considering using Gumroad to sell some of your products, then you’ll certainly be wondering about the tax cost that you will need to pay for all the revenue. It is very important to ensure that you are on top of these taxes, to avoid any issues with IRS.
You’ve come to the right place to figure this out! This article has compiled all you need on tax and Gumroad into a very useful guide. We’ll answer: “What documents do I need for taxes Gumroad?” Let’s get started today!
What Documents Do I Need For Taxes Gumroad In The USA
For every sale that originates from Gumroad in certain states, the company is required to collect and report the taxes related to that sale.
The amount of tax is dependent on the state in the US. Gumroad is required to collect and remit sales taxes in two states in the US. These are Wisconsin and Washington. (See our article ‘Is Gumroad Safe?‘)
This is only true if the sales are made through Gumroad Discover. Gumroad will also aid you in calculating the sales tax on the physical goods that you may be selling.
Taxes Managed By The Creator
Gumroad doesn’t have the sales tax collection responsibility in any other state. In these states, you will need to collect the taxes yourself. You will also be in charge of remitting them to the authorities yourself.
Before you start selling on Gumroad, you must talk with a tax advisor to ensure that you are correctly determining whether your product sales are taxable in certain states. You will then need to acquire the permits necessary.
Once you have properly confirmed your sales tax responsibility, you will need to follow the steps below:
- Head to the settings page
- Click on ‘Apply sales tax in…’, and select the states that you have nexus and tax permits for making sales
- Click on ‘Update settings’ to make these changes
You can change these settings at any time for future purchases, but these criteria will not apply to previous purchases retrospectively.
Inclusive Vs Exclusive Sales Tax
If you want to add a sales tax on top of the product that you have listed, you will need to head over to the pricing section of your physical product.
When you get to this page, you will need to select the section that says ‘collect sales tax on top of this price’.
This should be in the pricing section of your physical product. If you do not select this option, then the price of your product will include tax within it.
Once your product is online, you will then need to add a sales tax collection. This tax collection will be dependent on the address that is entered by the customer at the checkout.
Customers will only be charged sales tax if the seller has chosen to collect the sales tax in their state.
Exporting Sales Tax Data
You can download a breakdown of the tax that you have collected through your sales by downloading your sales CSV.
You will now have to double-check and remit the sales tax that is owed, and pay it to the tax collecting agency. It is a good idea to consult with a local tax professional to make sure that you are carrying out this process correctly. It can be complicated because of how much it varies from state to state, as well as any other country.
Taxes In The EU And The UK
If you sell your products online to a customer who is located in the EU or the UK, it is the responsibility of Gumroad to collect VAT on any digital product sales.
This process is very straightforward, and sellers will not have to do anything! The company’s personal services will collect and remit the tax for you.
With these taxes, the seller really doesn’t have to do anything worth reporting. Everything is handled by Gumroad. They are responsible for collecting the taxes for the UK and EU buyers.
VAT on physical products is slightly different. This is not collected by Gumroad. Instead, it is paid for by the buyer alongside shipping.
If you are selling e-publications on Gumroad you should be aware that lots of countries in the EU have reduced their local VAT rates for these e-publications.
If you are selling an e-publication that fits into this category, you can apply these reductions by following the steps below:
- Head to your product editor
- Scroll down to the ‘product’ tab, and click on ‘mark product as e-publication’
If you are not sure whether your product counts as an e-publication, then you should check with a tax accountant to make sure.
If your customer requests a refund, and they have paid VAT on their purchase, there’s no need to worry! All refunds will also include a VAT refund.
Taxes In Australia
If you are selling products to customers in Australia, then you don’t need to worry about taxes. Gumroad is responsible for collecting GST. This is done in the same way as the EU VAT that is explored above.
Any sales made to customers in Australia will include GST. You don’t need to do anything except sit back and watch it happen!
If someone from Australia buys your product, Gumraod will charge 10% GST in addition to the price of the product. Gumroad will then remit this to the Australian Taxation Office for you.
In Australia, there are a few exemptions from this tax. Both custom delivery and physical products are exempt from this tax.
If Australian customers are exempt from tax, they can enter their ABN at checkout and get a GST exemption.
If Australian customers request a refund, they will also receive a GST refund at the same time, usually within 3-5 business days.
Taxes In India
Any creators from India uploading to Gumroad will be able to charge their customers tax by heading to settings. Gumroad does not directly deal with these taxes.
The tax will be paid to the creator who will need to remit this in India.
How To Cash Out On Gumroad
Once you have made a sale on Gumroad, you will then need to make sure that you cash out your earnings. This will be done differently depending on your location.
If you are making a sale from the UK, US, Canada, or Australia, you will receive your payments through a direct deposit. From anywhere else in the world, you will receive this money from Paypal.
Gumroad does charge some sales fees, so your payment may seem smaller than you first expected. If you opt for the premium Gumroad account, these fees will be much smaller.
Importance Of Understanding Taxes On Gumroad
It is very important that you understand how the taxes work in different situations when you are selling products on Gumroad. (Check out ‘How To Sell More On Gumroad’)
This is because, in certain situations, you will be required to take action when you sell something. While this is not the case with all sales activity, it is very important to be aware of when this is the case to make sure that you know what you’re doing.
So, now you should have all the information that you need on the subject Tax and Gumroad in this ultimate guide. This article has detailed everything you need to know about taxes when selling both nationally and internationally.